And the winner of the Japan award is...
1-year return: -1.1%
3-year return: 64.5%
Baillie Gifford Japanese is no stranger to our Rated Funds, having taken gold or silver in four of the past six years. It now takes the title of Best Japan fund in our 2019 awards, on the basis that it has the most attractive risk/reward profile among its peer group over three years.
Despite losing money over the past year, the £2.85 billion fund has nevertheless beaten the sector average and the Tokyo Stock Price index. The fund tends to perform well when high-growth companies do well, particularly those in the consumer-facing and technology sectors. Picking the right companies within these areas has led to strong outperformance.
Matthew Brett worked alongside veteran Japanese investor Sarah Whitley as co-manager of the fund from 2008 and took the helm when she retired in April 2018. Baillie Gifford’s investment style is team-based, so there has been no change to the investment approach here: bottom-up, growth-orientated and long-term, in line with others in the Baillie Gifford stable.
Brett seeks to identify companies – typically 50 to 60 – that have potential for good long-term growth. In contrast to other major markets, growth often commands little or no valuation premium in Japan, so he looks to identify leading global businesses that trade on a substantial discount to their peers. Key factors that drive overall stock selection include a competitive advantage, robust finances and strong management alignment with shareholders.
The fund holds companies in a spread of sectors, from banks and industrial engineering firms to retailers and electronics companies. Top holdings include SoftBank, e-commerce firm Rakuten, car manufacturer Toyota Motor and automation specialist Fanuc.
HIGHLY COMMENDED FUND
A Rated Fund since 2016 and award winner in this category in 2018, Lindsell Train Japanese Equity is runner-up in 2019. It has produced consistently strong performance from a small number of holdings, typically 20 to 35.
Michael Lindsell has run the fund since 2004 with a focus on exceptional firms, truly sustainable business models and established resonant brands.
He likes companies that can demonstrate long-term durability in cash and profit generation. This is evident in the fund’s two largest holdings – Nintendo, which is responsible for most of the best-selling computer games of all time, and Kao, a household products provider which holds at least a top three position in every major toiletry and laundry category in Japan.
He invests for the very long term hence the fund’s turnover is among the lowest in the sector
Profiting by identifying global companies on a discount